Posted: August 30, 2023
Program Facilitator, Ms Fifi Peters
Representatives from the different Associations
Representatives from the different Companies
Ladies and Gentlemen
It is great to be here today and I want to thank the South African Iron and Steel Institute for inviting us to this inaugural summit.
What I would like to do today is firstly to talk about the Steel Industry and its centrality to South Africa’s industrialisation path.
Secondly, I want to talk briefly about the global steel sector and challenges faced by a number of countries including South Africa.
Lastly, I want to conclude by talking about how we can continue to build an inclusive sector and an economy that provides opportunities for all.
Steel is one of the most important materials in the world. It is present in most aspects of the economy, from transportation, infrastructure to the simple steel container that keeps food fresh.
Steel is used in the production of colossal structures as well as small components for precision instruments.
It is durable, adaptable, and endlessly recyclable making it the start of our journey toward reducing our carbon footprint and setting us on a path to a much greener industry.
South African Steel Sector
South Africa is endowed with one of the most diverse and valuable mineral resource portfolios globally.
These range from precious metals, ferrous and non-ferrous metals and other industrial metals.
At the peak of the industry’s performance in 2010, South Africa accounted for 0.59% of global steel production.
Due to the decline, our country accounts for just 0.23% of global steel output and is ranked 34th in the world.
Ladies and Gentlemen, we have a massive challenge on our hands and we need to work tirelessly to regain our position as one of the top producers of steel globally.
South Africa’s steel value-chain, with backward and forward linkages, is critical in building a sustainable economy that is underpinned by multiple sectors that are dependent on the steel industry.
The sectors that should support our quest to build a sustainable economy include construction, mining, automotive, energy, packaging and transport.
The value chain employs approximately 200 thousand workers while top steel consuming industries such as mining, construction and autos contribute a further R600 billion to the GDP (about 15%) and employ about 8 million workers.
This is the main reason the steel industry remains very important to the South African economy.
Ladies and gentlemen,
It is a serious cause for concern that the African continent accounts for just 1.12% of global steel production; yet it has some of the world’s largest mineral reserves.
Africa is home to about 17.9% of the world’s population, but accounts for 2.84% of the global Gross Domestic Product.
Africa continues to urbanise at a rapid rate. It is estimated that in 2015, 50% of Africa’s population had urbanised, up from 39% in 2010.
Today, Africa has 63 cities with populations of over 1.2 billion people, up from 49 cities in 2010 and 30 cities in 2000.
To handle this migration, cities are expanding rapidly to become mega-cities. Building these mega-cities is going to require a lot of steel.
As urban population densities increase, so too does the need for steel to build workspace, accommodation, and public-transport infrastructure.
The energy needs in Africa are driving the demand for renewable energy sources.
Steel is a major material for many of these including solar, and wind power grids, and pipelines for water, gas, and resource management.
Steel is therefore a crucial element to the advancement of Africa’s growth and we must work together to create opportunities for all industry role players.
The World Steel Association estimates average global apparent steel use per capita at 221.8kg in 2022, while in the same period, Africa’s leading producers, Egypt and South Africa stand at 100.3kg and 73.1kg respectively, thus illustrating the opportunities for accelerated development on the continent.
Africa’s industrialisation needs has prompted the decision to create a large free trade area, through the African Continental Free Trade Area (AfCFTA).
This will provide additional markets through preferential access and incentivise the development of regional value-chains, from iron-ore to steel, and beyond.
Accordingly, the AfCFTA is one of the critical pillars of the steel masterplan, and reflects the role that steel will play in the integration of the continental economy through infrastructure connectivity and expanded intra-African trade in manufactured goods.
Therefore, our fortunes as a country and the domestic steel industry are very much tied to the integration of the African continental economy.
I urge you to take advantage of the strategic geographic location and competitive advantage within the continent.
Global Steel Industry
The global steel production in 2022 was characterised by low growth in China and the decline in the developed economies led by Europe, Japan and the United States.
According to the World Steel Association (2023), global crude steel production reached 1. 89 billion tonnes in 2022, signaling a reduction of 3.6% from 1.96 billion tonnes of 2021.
This negative growth trajectory is expected to continue amid the current challenging global economic environment.
The war in Ukraine, slow global economic growth, rising interest rates and high inflation are some of the major risk factors to the global steel industry.
Whilst, this picture may look bleak, it does also present opportunities for the local industry to adjust and forge a new better future for itself.
Ladies and gentlemen,
As you know, we have successfully concluded the 15th BRICS Summit recently held in our country.
We expect the summit to bring opportunities for the steel industry through collaborations and sharing of knowledge and experience among BRICS countries.
The Infrastructure Working Group representing the BRICS countries has committed to partner with the respective Governments to create opportunities through various high-impact infrastructure projects.
This partnership will focus on enhancing the all-round connectivity among the BRICS countries; promoting the development of smart cities and providing financial support for the development of tangible and sustainable infrastructure projects.
The BRICS summit has also resolved to convene the Infrastructure Investment Symposium later this year.
The symposium will bring together BRICS governments, investors and financiers for a discussion on ways to work with the private sector to promote the use of green, transition and sustainable finance in infrastructure delivery.
Steel and Metal Fabrication Masterplan
The development of the Steel masterplan is a testament to the importance of this industry to the economy.
As government we entered into a social compact with the industry and labour to support long-term growth of the industry.
The masterplan has also been prepared to anchor the implementation of the Re-imagined Industrial Strategy and the Re-construction and Recovery Plan, both of which are primary movers for integrated steel demand growth.
Government conceptualised the masterplan as a turnaround action-oriented plan aimed at improving the overall competitiveness of firms, addressing levels of imports, increasing export participation and repositioning the industry to be resilient in the intense global pressures.
The key outputs include the following:
- A social compact to stabilise and grow the steel and steel products industry;
- Increasing demand and reducing leakages due to illicit trade and inadequate localisation;
- Retaining and increasing decent jobs;
- Transformation of the industry; and
- Ensuring the industry and workers are prepared for the 4IR and green economy
The implementation plan focuses on six (6) priority areas: Demand-Side measures; Supply-Side measures; Exports; Transformation; Human Resources and Skill Development; and Resource Mobilisation.
Many of you in the room participate in the various masterplan implementation platforms and are very aware that progress is uneven. This means we must roll up our sleeves and tackle the existing challenges.
Ladies and gentlemen,
Let me take some time to report on a few implementation highlights since the masterplan and its associated implementation plan was adopted in 2021 by the social partners:
- Twelve trade interventions have been implemented to mainly support downstream industry competitiveness and growth.
- The Price Preference System was recently extended for 4 years to secure supply of scrap metals at competitive pricing to support value-addition.
- IDC, through its own balance sheet and the Downstream Steel Competitiveness Fund has directed funding resources to support projects in the value-chain. In 2022, investments worth R5.2bn have been facilitated by the IDC and 2220 jobs supported in the value chain.
- To support greater export efforts, the IDC has partnered with ECIC and have established an Intra-Africa Trade Facility to cover both commercial and political risks.
- An energy resilience fund was launched in July 2023, with 15bn contribution from the IDC to support firms on the supply and demand side of the energy problems. The IDC intends to reduce the impact, by providing concessionary funding to Energy Services Companies (ESCOs) to enable them to supply financed energy solutions to SMEs across all sectors of the economy.
- The Steel Fund has been established to support compliance work-programmes in the value chain as an immediate priority.
- All social partners recognise the importance of increasing aggregate demand – mainly driven by large infrastructure and private sector construction projects – to sustain development and growth of this Industry. Through various platforms, there are concerted efforts to work closely with industry and shareholder government departments to better understand the roll-out of projects and how localisation can be maximised.
The carbon intensity of the South African steel value chain must remain a key concern to all of us as the world is transitioning towards a less carbon footprint.
Reducing the impact of climate change through decarbonisation of the economy and moving towards green steel and technologies, are all gaining momentum internationally.
South Africa needs to engage on this path to reduce our impact on climate change and for our products remain competitive in global markets.
The European Union plans to implement carbon border tax on a number of industries from October 2023, providing a 2-year transition period whereby only emissions reporting is mandatory without any financial payments.
The carbon tax, widely known as Carbon Border Adjustment Mechanisms (CBAM), stands to negatively affect South Africa’s manufacturing sector, in particular industries in the Iron & steel, cement, aluminium, fertiliser, and electricity.
The iron and steel industry in particular will feel the most brunt from this tax policy, with about R10 billion of exports based on 2022 data at risk, which represent 2.3% of South Africa’s exports to the European Union.
The risk exposure is amplified by the fact that the European Union is a major export destination for South Africa’s exports, accounting for 21.8% of South Africa’s total exports in 2022.
The de-carbonization of the primary steel industry remains key, as an input into greener production further down the value chain.
End user industries are showing growing interest in carbon-reduced/neutral steel products to decarbonize their own value chains and reduce market access risks; for example the automotive and renewable industries.
In conclusion, we firmly believe that with the effective implementation of the social compact between government, business and labour, the domestic industry will bounce back and regain its position in the global arena.
I must also warn that if we choose to pursue our narrow interests at the expense of shared agenda, we then run the risk of further de-industrialisation.
I urge us all to rally behind this masterplan as our chosen roadmap for steel industry value chain growth and development.
I wish this inaugural summit fruitful deliberations and I hope that future installments will contribute significantly to the mammoth task of finding lasting solutions to the industry’s problems.
I thank you.